A credit report might not tell the whole story about a potential tenant, but it can certainly give you a clearer picture. Depending on the type of service you pay for, a credit report can show credit history, public records, identifying information, and recent inquiries. All these factors are important in making a decision about whether or not to trust someone with your property. Here are the three main reasons you should always require a credit report from potential tenants.
Credit Reports Help You Evaluate Financial Stability
Obviously, the primary quality a landlord looks for in a tenant is the ability to pay the rent. This is the purpose of a renter credit check in the first place. While most landlords are somewhat lenient when it comes to a late payment here and there, a pattern of non-payments, charge-offs and/or repossessions can indicate an unwillingness or inability to pay. On the contrary, tenants with good credit typically do everything they can in order to keep their high rating, so they are more likely to pay on time.
Some landlords forego the process because of the cost—and with good reason. To request and run a credit report on every potential tenant can get costly. The best way to keep this investment low is to require prospective tenants to pay the fee with the application. This usually ensures that only credit-worthy renters apply since people with bad credit will be less likely to throw their money away if they know the outcome. If you’d like to show some good will, you can always offer to take the amount of the credit fee off their first month’s rent if they qualify.
Credit Reports Help You Verify Identity
Scams are on the rise especially on sites such as Craigslist and landlords are definitely not immune. One of the biggest scams in the industry occurs when a tenant writes a check on a nonexistent account and asks for a refund before the landlord knows it’s a fake. Running a credit report on all potential tenants is a good way to help verify an applicant’s identity. Just make sure you actually see their driver’s licenses and other documents they use in the process.
Credit Reports Can Help You Detect Criminal Behavior
Most credit reports will also list a detailed account of any negative public records. This could include judgments, divorces, and anything else filed against them. This doesn’t necessarily mean that you must dismiss a particular renter because of a difficult period; but it could help give you a glimpse into a pattern of illegal or immoral behavior. For example, if a person has several unpaid judgments against them, it’s possible they have had to make some legal restitution for non-compliance. Rather than being a one-time event, this could be a pattern in which case, failing to pay yet another bill will probably not cause them concern.
And even though bad credit and legal problems don’t make someone dangerous, it is still a good indication that there may be more going on than just bad spending habits. Someone that has a record of DUI charges may be more inclined to hit the bottle and make a bad decision so it’s best to keep not only your property safe, but your other tenants too by checking a renter out first! Speaking with a DUI lawyer about a prospective tenant’s file would be a great way to gain more clarity on the seriousness of their charges.
Bottom Line
Credit checks are fairly quick and easy to run, so there is no reason for a landlord to take a chance on housing bad renters. Allow the applicants to incur the cost of the report and it’s a completely free tool to manage your risk. No landlord should blindly allow strangers into their property without knowing a little bit about their background. Save yourself the headache and possible legal fees to evict a bad tenant and find out who you’re renting to.